UNITED STATES DISTRICT COURT FOR THE NORTHERN …€¦ · Case 3:11-cv-00882-O Document 365 Filed 08/07/19 Page 1 of 2 PageID 7459 Case 3:11-cv-00882-O Document 365 Filed 08/07/19

Case 3:11-cv-00882-O Document 365 Filed 08/07/19 Page 1 of 2 PageID 7459 Case 3:11-cv-00882-O Document 365 Filed 08/07/19 Page 1 of 2 PageID 7459

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

v.

Plaintiff, Civil Action No. 3:11-CV-882-O

DAVID RONALD ALLEN, et al.,

Defendants.

SECURITIES AND EXCHANGE COMMISSION’S MOTION FOR AN ORDER CONSOLIDATING FUNDS, DIRECTING FINAL JUDGMENT PAYMENTS

TO THE SEC, APPROVING A DISTRIBUTION PLAN, AND APPOINTING A DISTRIBUTION AGENT

The Plaintiff Securities and Exchange Commission (the “SEC”) respectfully moves this

Court for an Order consolidating funds; directing final judgment payments to the SEC;

approving the SEC’s plan to distribute funds under its jurisdiction in this matter, including

accrued interest; and appointing Catherine E. Pappas, an SEC employee, as the Distribution Agent

(the “Motion”). By the Motion, the SEC seeks an Order facilitating the distribution of

approximately $1.1 million, less administrative costs, to claimants previously identified by the

Court-appointed receiver (the “Receiver”), using the Court-approved methodology underlying

the Receiver’s prior distribution.

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Wherefore, for the reasons set forth in the accompanying memorandum and related

papers, the SEC seeks entry of the proposed judgment submitted with this Motion.

Dated: August 7, 2019

Respectfully submitted,

s/Catherine E. Pappas Catherine E. Pappas PA Bar No. 56544 Securities and Exchange Commission One Penn Center 1617 JFK Blvd., Ste. 520 Philadelphia, Pa. 19103 Tel: (215) 597-0657 Fax: (215) 597-2740 Email: [email protected]

2

mailto:[email protected]

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DALLAS DIVISION


v.



Defendants.

SECURITIES AND EXCHANGE COMMISSION’S CERTIFICATE OF INABILITY TO

CONFER PURSUANT TO LOCAL RULE 7.1 WITH ATTACHED INVESTOR NOTICE

Pursuant to Local Rule 7.1(b)(3), the Securities and Exchange Commission (“SEC”)

respectfully submits this Certificate explaining why it did not confer with an attorney for each

party affected by the requested relief to determine whether the motion is opposed. Although not

officially “parties,” the requested relief arguably affects some or all of the persons or entities

identified by the Court-appointed Receiver as claimants (“Identified Claimants”) and it was

impracticable for counsel for the SEC to confer with each.

By way of further information, prior to the filing of the accompanying Motion, the SEC

sent notice in the form of the Attachment to this Certificate (the “Investor Notice”) to the last

known addresses of the Identified Claimants. The Investor Notice, among other things, informed

Identified Claimants of the SEC’s intent to recommend to the Court a second distribution that

will use the claim determinations and distribution methodology previously approved by this

Court, identified a public website on which the SEC will post its filings in this case and any other


updates, and requested completion of a Questionnaire that, among other things, sought

confirmation of Internet access. The SEC will send a copy of the Motion and accompanying

papers to those Identified Claimants who responded to the Investor Notice that they do not have

access to the Internet, but the SEC will otherwise rely on its posting of the filing on the public

website as notice to investors of the filing of the Motion.

Dated: August 7, 2019

Respectfully submitted,


Att: Investor Notice (with attachments A & C, but omitting Exhibit B (Dkt. No. 331))

2



Attachment to Local Rule 7.1 Certification (Investor Notice with Attachments A and C only )



DALLAS DIVISION

SECURITIES ANO EXCHANGE COMMISSION,

V.

Plaintiff,

Civil Action No. 3: l l-CV-882-0


Defendants.

1.NVESTOR NOTICE

TO:

INVESTOR NAME: INVESTOR NUMBER:

PLEASE READ THIS INVESTOR NOTICE IN ITS ENTIRETY

You are receiving this notice because the lnvestor sel forth in the subject line above ("Investor") has been identified as a claimant by the Receiver appointed by the Court (the "Receiver") in the captioned action. If you are not the Investor, you have been identified as the contact for the Investor. By this Notice, the Securities and Exchange Commission (the "SEC") is informing you of a possible second distribution in this matter and seeking from you certain information (see Exhibit A) that vou must provide in order to be considered for a distribution. Your receipt of this Investor Notice and/or your provision of the requested information DOES NOT mean that the Investor will receive a distribution; that determination will be made if and when the Court approves a distribution, in the manner approved by the Court.

BACKGROUND AND A POSSIBLE SECOND DISTRIBUTION

By way ofbackground, in 2011 the SEC filed the captioned action in the U.S. District Court for the Northern District of Texas (Dallas Division) against China Voice Holding Corp. ("China Voice"), David Ronald Allen, William F. Burbank IV, and multiple other defendants and reliefdefendants, alleging that Allen, Burbank, and China Voice engaged in a series of false


Investor Number:

p .; �· (.' 12

and misleading statements and material omissions to investors about China Voice's financial condition. You can access the amended complaint here:

https://wvvw.sec.uov/litigationfcomplaints/20 l l/comp22006.pdf

In January 2012, the Court established a receivership estate comprised of the assets of the defendants and the relief defendants and appointed the Receiver. Pursuant to a claims process, the Receiver identified over 130 clairnants to the receivership. The Recciver recommended to the Court, and the Court approved, a plan of distribution setting forth the methodology by which the Receiver would determine which of the identified claimants would receive a distribution ("Receiver's Plan"). A copy of the Receiver's Request for First Interim Distribution (Dkt. No. 331)ois attached as Exhibit B. Pursuant to the Receiver's Plan, the Receiver distributedoapproximately $995,000 to ninety-four (94) investors. The Court has since terminated theoreceivership and the Receiver has transferred all remaining assets to the SEC.o

The SEC now holds over $1 million that it hopes to distribute. To this end, the SEC intends to recommend to the Court a second distribution that will use the methodology and claims determinations previously approved by the Court in connection with the Receiver's Plan. 1

See Exhibit C, pp. 9-12.

You will be able to view updates, including the SEC's filings with respect to a second distribution and any Court Orders regarding the same, at the following public website:

https ://www.sec.govidivisions/enforce/clairns/china-voice-hoIdin�.htm

INFORMATION REQUIRED FROM YOU IN ORDER FOR THE INVESTOR TO BE CONSIDERED IN CONNECTION WITH A SECOND DISTRIBUTION

The Investor information provided to the SEC by the Receiver, such as the full name, address. and IRA custodian for identified claimants, may not be current. To ensure that any distribution is properly directed, you MUST fully complete and sign the Questionnaire attached as Exhibit A and return it to the address set forth below no lat.er than June 12, 2019. If the information that you supply on the Questionnaire changes after you submit it to the SEC, please promptly provide the new information to the SEC at the address set forth below. Failure to

return the completed and executed questionnaire by June 12, 2019 may result in a determination that the Investor is ineligible to receive a distribution payment.

Securities and Exchange Commission Catherine E. Pappas, Esq. c/o Office of Distributions

I 00 F Street, N.E. Mail Stop 5876

Washington, D.C. 20549

Alternatively, you may submit the completed and signed Questionnaire by email to:

Under the SEC's proposal, there will be no new claims process; the SEC will use the claim determinations made by the Receiver and approved by the Court.

1

www.sec.gov

https://wvvw.sec.uov/litigationfcomplaints/20






EXHIBIT C (Exhibit B (Dkt. 331) deliberately omitted)


SEC v. Allen Distribution Fund 3:11-CV-882-O (N.D. Tx.)

Tax Consequences of Distribution Payments

If you are found eligible for a distribution pursuant to a plan of distribution approved by the Court, the United States Securities and Exchange Commission (“SEC”) may direct the United States Treasury to issue a distribution to you in the action identified above. The payment would issue from a Distribution Fund established by the SEC in SEC v. Allen, et al. in the United States District Court for the Northern District of Texas (Case No. 3:11-cv-882-O). Distributions will be calculated, and eligibility for a distribution will be determined, pursuant to the Court-approved plan of distribution.

The Distribution Fund is a “Qualified Settlement Fund” (“QSF”) as defined in Section 468B(g) of the Internal Revenue Code, 26 U.S.C. Section 468B(g), as amended, and the Treasury regulations promulgated thereunder, 26 C.F.R. 1.468B-1 et seq. A distribution from the Distribution Fund has tax consequences.

Generally, a distribution is not income to you to the extent of your basis in your investment(s). However, you must reduce your basis by the amount of the distribution. If the distribution exceeds your tax basis in your investment, then the excess is includable in your income as capital gain. Any such capital gain is long-term capital gain unless you disposed of your investment before holding it for longer than one year. If you do not have reasonable access to records indicating the tax basis of your investment, then you may assume that your tax basis is zero and that the entire distribution in includable in your income as capital gain. The QSF is not required to – and will not – issue a Form 1099 to you with respect to the distribution.

IRA, QRP, or Other Tax Deferred Vehicle. If you held your investment in an individual retirement account (“IRA”), qualified retirement plan (“QRP”), or other tax deferred vehicle, the distribution payment, if one is made, will be made payable to the trustee or custodian of your IRA or QRP. If the payment comes to you, you should direct it to the trustee or custodian of your IRA or QRP for deposit into your IRA or QRP account. Caution: If the check is cashed or the payment deposited in any account other than an account eligible to receive the payment, it may be subject to income tax and a 10% penalty.

Please note that the parties to this matter, the Fund Administrator, and the Tax Administrator cannot provide tax advice to investors determined eligible to receive a distribution. The information contained herein is being provided for informational purposes only to assist you in determining the United States (“U.S.”) federal income tax consequences of a distribution payment if you are a citizen or resident of the U.S. The tax consequences of a distribution may vary depending on your individual circumstances. The information provided herein may not be applicable if you are a nonresident alien of the U.S. or a FATCA-subject payee and it does not address the alternative minimum tax provisions of federal tax law, state, local and non-U.S. tax rules, or the effect of possible changes in laws. THE INFORMATION CONTAINED HEREIN IS NOT AND SHOULD NOT BE RELIED UPON AS TAX ADVICE. CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE DISTRIBUTION TO YOU.



DALLAS DIVISION


v.



Defendants.

CERTIFICATE OF SERVICE

I hereby certify that on August 7, 2019, I electronically filed the foregoing motion and

accompanying papers with the clerk of the court for the U.S. District Court, Northern District of

Texas, using the electronic case filing system of the court. The electronic case filing system will

send a “Notice of Electronic Filing” to the attorneys of record who have consented in writing to

accept this Notice as service of this document by electronic means.



Documents

UNITED STATES DISTRICT COURT FOR THE NORTHERN …€¦ · Case 3:11-cv-00882-O Document 365 Filed 08/07/19 Page 1 of 2 PageID 7459 Case 3:11-cv-00882-O Document 365 Filed 08/07/19